BETHESDA, Md., April 23 /PRNewswire-FirstCall/ -- Host Hotels &
Resorts, Inc. (NYSE:HST), the nation's largest lodging real estate
investment trust (REIT), today announced its results of operations
for the first quarter ended March 27, 2009. (Logo:
http://www.newscom.com/cgi-bin/prnh/20060417/HOSTLOGO ) - Total
revenue decreased $171 million, or 16.2%, to $882 million for the
first quarter of 2009 compared to 2008. - Net loss was $60 million
for the first quarter of 2009 compared to net income of $63 million
for the first quarter of 2008. The diluted loss per share was $.12
for the first quarter of 2009 compared to earnings per share of
$.10 in 2008. Operating results for the first quarter of 2009 were
significantly affected by gains on a hotel disposition, as well as
non-cash impairment charges related to potential asset sales.
Additionally, the first quarter of 2009 and 2008 include an
increase in non-cash interest expense due to an accounting change
implemented in the first quarter of 2009 that related to our
exchangeable debentures. The cumulative effects of these items were
to decrease earnings by $28 million, or $.05 per diluted share, for
the first quarter of 2009. For further detail, refer to the
"Schedule of Significant Items Affecting Earnings per Share and
Funds From Operations per Diluted Share" attached to this earnings
release. - Funds from Operations (FFO) per diluted share were $.10
for the first quarter of 2009 compared to $.33 per share for the
first quarter of 2008. FFO per diluted share for the first quarter
of 2009 was reduced by $.09 per diluted share due to non-cash
impairment charges and the accounting change noted above. -
Adjusted EBITDA, which is Earnings before Interest Expense, Income
Taxes, Depreciation, Amortization and other items, decreased $88
million for first quarter 2009, to $174 million. For further detail
of certain transactions affecting net income, earnings per diluted
share and FFO per diluted share, refer to the "Schedule of
Significant Items Affecting Earnings per Share and Funds From
Operations per Diluted Share" attached to this press release.
Adjusted EBITDA, FFO per diluted share and comparable hotel
adjusted operating profit margins (discussed below) are non-GAAP
(generally accepted accounting principles) financial measures
within the meaning of the rules of the Securities and Exchange
Commission (SEC). See the discussion included in this press release
for information regarding these non-GAAP financial measures.
OPERATING RESULTS Comparable hotel RevPAR for the first quarter of
2009 decreased 19.8% when compared to the first quarter of 2008.
Comparable hotel adjusted operating profit margins decreased 400
basis points for the first quarter. For further detail, see "Notes
to the Financial Information." BALANCE SHEET As of March 27, 2009,
the Company had approximately $653 million of cash and cash
equivalents. The Company's cash balance will generally be utilized
for repayments or repurchases of debt, capital improvements and to
maintain higher than historical cash levels for working capital.
The Company has $400 million of available capacity under the credit
facility. In the first quarter, the Company repurchased $75 million
face value of its 3.25% Exchangeable Senior Debentures (2004
Debentures) for approximately $69 million under its stock and
equity-linked security repurchase program. The repurchased
debentures had a carrying value of $72 million at the time of
repurchase; therefore, the Company recorded a gain on the
repurchases of approximately $3 million. Since the fourth quarter
of 2008, the Company has repurchased $175 million face value of the
debentures for $151 million, and currently has $325 million of the
2004 Debentures outstanding. The Company also obtained a $120
million mortgage on the JW Marriott, Washington, D.C. The mortgage
matures on April 2, 2013, with an additional one-year extension
subject to certain conditions. During the first quarter, the
Company repaid the $34 million mortgage secured by the Westin
Indianapolis prior to its scheduled maturity. CAPITAL EXPENDITURES
Capital expenditures totaled approximately $108 million for the
first quarter, which was a decline of approximately 28% from prior
year. These expenditures included return on investment (ROI) and
repositioning projects of approximately $59 million. DIVIDEND
Consistent with our previous guidance, the Company expects to
declare a $.30 to $.35 per share common stock dividend in the
fourth quarter (assuming no increase in its outstanding common
shares), which may be payable either in cash or in a combination of
cash and shares of common stock. The Company did pay the first
quarter dividend on its preferred stock and plans to continue
paying such dividends. 2009 OUTLOOK The Company's ability to
predict future operating results continues to be significantly
affected by the current recession and its effect on business and
leisure travel. The Company expects that the trends affecting the
economy will continue to depress hotel operating results across the
portfolio. In the event that comparable hotel RevPAR were to
decline approximately 18% to 20% for the full year 2009, the
Company would anticipate that full year 2009 operating profit
margins under GAAP would decrease approximately 1,000 basis points
to 1,100 basis points and its comparable hotel adjusted operating
profit margins would decrease approximately 540 basis points to 600
basis points. Based upon these parameters, the Company would
estimate the following would occur: -- loss per diluted share
should be approximately $.34 to $.41; -- net loss should be
approximately $176 million to $216 million; -- FFO per diluted
share should be approximately $.68 to $.76 (including the deduction
of $40 million of first quarter non-cash impairment charges $30
million of non-cash interest expense on the exchangeable debentures
for full year 2009 due to an accounting change); and -- Adjusted
EBITDA should be approximately $800 million to $850 million. About
Host Hotels & Resorts Host Hotels & Resorts, Inc. is an
S&P 500 and Fortune 500 company and is the largest lodging real
estate investment trust and one of the largest owners of luxury and
upper upscale hotels. The Company currently owns 116 properties
with approximately 63,000 rooms, and also holds a non-controlling
interest in a joint venture that owns 11 hotels in Europe with
approximately 3,500 rooms. Guided by a disciplined approach to
capital allocation and aggressive asset management, the Company
partners with premium brands such as Marriott(R), Ritz-Carlton(R),
Westin(R), Sheraton(R), W(R), St. Regis(R), The Luxury
Collection(R), Hyatt(R), Fairmont(R), Four Seasons(R), Hilton(R)
and Swissotel(R)* in the operation of properties in over 50 major
markets worldwide. For additional information, please visit the
Company's website at http://www.hosthotels.com/. Note: This press
release contains forward-looking statements within the meaning of
federal securities regulations. These forward-looking statements
are identified by their use of terms and phrases such as
"anticipate," "believe," "could," "estimate," "expect," "intend,"
"may," "plan," "predict," "project," "will," "continue" and other
similar terms and phrases, including references to assumption and
forecasts of future results. Forward-looking statements are not
guarantees of future performance and involve known and unknown
risks, uncertainties and other factors which may cause the actual
results to differ materially from those anticipated at the time the
forward-looking statements are made. These risks include, but are
not limited to: national and local economic and business
conditions, including the potential for terrorist attacks, that
will affect occupancy rates at our hotels and the demand for hotel
products and services; operating risks associated with the hotel
business; risks associated with the level of our indebtedness and
our ability to meet covenants in our debt agreements; relationships
with property managers; our ability to maintain our properties in a
first-class manner, including meeting capital expenditure
requirements; our ability to compete effectively in areas such as
access, location, quality of accommodations and room rate
structures; changes in travel patterns, taxes and government
regulations which influence or determine wages, prices,
construction procedures and costs; our ability to complete
acquisitions and dispositions; and our ability to continue to
satisfy complex rules in order for us to qualify as a REIT for
federal income tax purposes and other risks and uncertainties
associated with our business described in the Company's filings
with the SEC. Although the Company believes the expectations
reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that the
expectations will be attained or that any deviation will not be
material. All information in this release is as of April 23, 2009,
and the Company undertakes no obligation to update any
forward-looking statement to conform the statement to actual
results or changes in the Company's expectations. * This press
release contains registered trademarks that are the exclusive
property of their respective owners. None of the owners of these
trademarks has any responsibility or liability for any information
contained in this press release. *** Tables to Follow *** Host
Hotels & Resorts, Inc., herein referred to as "we" or "Host,"
is a self-managed and self-administered real estate investment
trust (REIT) that owns hotel properties. We conduct our operations
as an umbrella partnership REIT through an operating partnership,
Host Hotels & Resorts, L.P., or Host LP, of which we are the
sole general partner. For each share of our common stock, Host LP
has issued to us one unit of operating partnership interest, or OP
Unit. When distinguishing between Host and Host LP, the primary
difference is approximately 3% of the partnership interests in Host
LP held by outside partners as of March 27, 2009, which is
non-controlling interests in Host LP in our consolidated balance
sheets and net income/loss attributable to non-controlling
interests in our consolidated statements of operations. Readers are
encouraged to find further detail regarding our organizational
structure in our annual report on Form 10K. For information on our
reporting periods and non-GAAP financial measures (including
Adjusted EBITDA, FFO per diluted share and comparable hotel
adjusted operating profit margin) which we believe is useful to
investors, see the Notes to the Financial Information included in
this release. HOST HOTELS & RESORTS, INC. Consolidated Balance
Sheets (a) (in millions, except shares and per share amounts) March
27, December 31, 2009 2008 ---- ---- (unaudited) ASSETS ------
Property and equipment, net $10,581 $10,739 Due from managers 62 65
Investments in affiliates 176 229 Deferred financing costs, net 47
46 Furniture, fixtures and equipment replacement fund 119 119 Other
196 200 Restricted cash 38 44 Cash and cash equivalents 653 508 ---
--- Total assets $11,872 $11,950 ======= ======= LIABILITIES AND
EQUITY ---------------------- Debt Senior notes, including $852
million and $916 million, respectively, net of discount, of
Exchangeable Senior Debentures (b) $3,879 $3,943 Mortgage debt
1,517 1,436 Credit facility, including the $210 million term loan
410 410 Other 87 87 -- -- Total debt 5,893 5,876 Accounts payable
and accrued expenses 107 119 Other 163 183 --- --- Total
liabilities 6,163 6,178 ----- ----- Non-controlling interests in
Host Hotels & Resorts, L.P. (c) 147 156 Host Hotels &
Resorts, Inc. stockholders' equity: Cumulative redeemable preferred
stock (liquidation preference $100 million) 50 million shares
authorized; 4.0 million shares issued and outstanding 97 97 Common
stock, par value $.01, 750 million shares authorized; 526.4 million
shares and 525.3 million shares issued and outstanding,
respectively 5 5 Additional paid-in capital 5,882 5,874 Accumulated
other comprehensive income 2 5 Deficit (448) (389) ----- -----
Total Host Hotels & Resorts, Inc. stockholders' equity 5,538
5,592 Non-controlling interests-other consolidated partnerships (c)
24 24 -- -- Total equity 5,562 5,616 ----- ----- Total liabilities
and equity $11,872 $11,950 ======= ======= (a) Our consolidated
balance sheet as of March 27, 2009 has been prepared without audit.
Certain information and footnote disclosures normally included in
financial statements presented in accordance with GAAP have been
omitted. The consolidated balance sheets should be read in
conjunction with the consolidated financial statements and notes
thereto included in our most recent Annual Report on Form 10-K. (b)
As a result of the adoption of FASB Staff position APB 14-1,
"Accounting for Convertible Debt Instruments That May Be Settled in
Cash Upon Conversion (Including Partial Cash Settlement)" (FSP
14-1), the principal balance for our Exchangeable Senior Debentures
was reduced by $66 million and $76 million as of March 27, 2009 and
December 31, 2008, respectively, with an offsetting increase to
equity. The decline in principal reflects the unamortized discount
balance related to the implementation of FSP 14-1. See Note (e) to
"Other Financial and Operating Data," for further discussion. (c)
As a result of the adoption of SFAS 160, "Non-controlling Interests
in Consolidated Financial Statements - an amendment of ARB No. 51",
(FAS 160), which modifies the presentation of certain balance sheet
items such that non-controlling interests of other consolidated
partnerships (previously referred to as "Interest of minority
partners of other consolidated partnerships") is now included as a
separate component of equity. HOST HOTELS & RESORTS, INC.
Consolidated Statements of Operations (a) (unaudited, in millions,
except per share amounts) Quarter ended ------------------------
March 27, March 21, 2009 2008 -------- -------- Revenues Rooms $511
$621 Food and beverage 272 332 Other 70 70 -------- -------- Total
hotel sales 853 1,023 Rental income 29 30 -------- -------- Total
revenues 882 1,053 -------- -------- Expenses Rooms 138 156 Food
and beverage 201 241 Hotel departmental expenses 238 257 Management
fees 33 52 Other property-level expenses 82 81 Depreciation and
amortization 178 123 Corporate and other expenses 15 17 Gain on
insurance settlement (b) - (7) -------- -------- Total operating
costs and expenses 885 920 -------- -------- Operating profit
(loss) (3) 133 Interest income 2 4 Interest expense (c) (87) (83)
Net gains on property transactions and other 1 1 Loss on foreign
currency (1) - Equity in losses of affiliates (3) - --------
-------- Income (loss) before income taxes (91) 55 Benefit for
income taxes 14 7 -------- -------- Income (loss) from continuing
operations (77) 62 Income from discontinued operations (d) 17 1
-------- -------- Net income (loss) (60) 63 Less: Net (income) loss
attributable to non-controlling interests (e) 1 (9) --------
-------- Net income (loss) attributable to common stockholders (59)
54 Less: Dividends on preferred stock (2) (2) -------- -------- Net
income (loss) available to common stockholders $(61) $52
============= =========== Basic and diluted earnings (loss) per
common share: Continuing operations $(.15) $.10 Discontinued
operations .03 - -------- -------- Basic and diluted earnings
(loss) per common share $(.12) $.10 ============= ============ (a)
Our consolidated statements of operations presented above have been
prepared without audit. Certain information and footnote
disclosures normally included in financial statements presented in
accordance with GAAP have been omitted. (b) The 2008 gain on
insurance settlement reflects business interruption insurance
proceeds from damages incurred from Hurricane Katrina in 2005 and
excludes $2 million of management fees and other expenses, net,
related to the proceeds. (c) As a result of the adoption of FSP
14-1, interest expense increased $7 million for both the first
quarter of 2009 and 2008, respectively. Interest expense in the
first quarter of 2009 also includes the $3 million gain earned on
the repurchase of a portion of the 2004 Debentures. See "Schedule
of Significant Items affecting Earnings per Share and Funds From
Operations per Diluted Share" for further discussion. (d) Reflects
the results of operations and gains on sale, net of the related
income tax, for one property sold in 2009 and two properties
disposed of in 2008. (e) As of the first quarter of 2009, we have
adopted SFAS 160. As a result, net income attributable to
non-controlling interests of Host LP and of other non-consolidated
partnerships are no longer included in the determination of net
income. Prior quarter amounts have been revised to reflect this
presentation. The net income attributable to non-controlling
interests is included in the net income (loss) available to common
stockholders; therefore, the implementation of this standard had no
effect on our basic or diluted earnings per share calculation. HOST
HOTELS & RESORTS, INC. Earnings per Common Share (unaudited, in
millions, except per share amounts) Quarter ended Quarter ended
March 27, 2009 March 21, 2008 Per Per Share Share Income Shares
Amount Income Shares Amount ------ ------ ------ ------ ------
------ Net income (loss) $(60) 526.1 $(.11) $63 522.6 $.12 Net
(income) loss attributable to non-controlling interests 1 - - (9) -
(.02) Dividends on preferred stock (2) - (.01) (2) - - ------
------ ------ ------ ------ ------ Basic earnings available to
common stockholders (a)(b) (61) 526.1 (.12) 52 522.6 .10 Assuming
distribution of common shares granted under the comprehensive stock
plan less shares assumed purchased at average market price - - - -
.2 - Assuming deduction of gain recognized for the repurchase of
2004 Exchangeable Senior Debentures (c) (2) 3.9 - - - - ------
------ ------ ------ ------ ------ Diluted earnings available to
common stockholders (a)(b) $(63) 530.0 $(.12) $52 522.8 $.10 ======
====== ====== ====== ====== ====== (a) Basic earnings per common
share is computed by dividing net income available to common
stockholders by the weighted average number of shares of common
stock outstanding. Diluted earnings per common share is computed by
dividing net income available to common stockholders, as adjusted
for potentially dilutive securities by the weighted average number
of shares of common stock outstanding plus potentially dilutive
securities. Dilutive securities may include shares granted under
comprehensive stock plans, preferred OP Units held by minority
partners, exchangeable debt securities and other minority interests
that have the option to convert their limited partnership interests
to common OP Units. No effect is shown for any securities that are
anti-dilutive. (b) Our results for both periods presented were
significantly affected by certain transactions. For further detail,
see "Schedule of Significant Items Affecting Earnings per Share and
Funds From Operations per Diluted Share." (c) During the first
quarter of 2009, we repurchased $75 million face value of the 2004
Debentures with a carrying value of $72 million for $69 million.
For the first quarter of 2009, the adjustments to dilutive earnings
per common share related to the 2004 Debentures include the $3
million gain on repurchase, net of interest expense on the
repurchased debentures. The potentially dilutive effect of the
still outstanding debentures is not included as they would be
anti-dilutive for all periods presented. HOST HOTELS & RESORTS,
INC. Comparable Hotel Operating Data (unaudited) Comparable Hotels
by Region (a) As of March 27, 2009 Quarter ended March 27, 2009
-------------------- -------------------------------- Average No.
of No. of Average Occupancy Properties Rooms Daily Rate Percentages
RevPAR ---------- ------ ---------- ----------- ------- Pacific 27
15,943 $187.16 62.0% $115.99 Mid-Atlantic 11 8,684 205.16 62.4
127.99 North Central 14 6,175 120.95 49.9 60.32 Florida 9 5,677
222.58 70.5 156.94 DC Metro 13 5,666 212.61 67.2 142.79 New England
10 5,165 141.68 45.4 64.27 South Central 9 5,687 156.52 65.3 102.14
Mountain 8 3,364 185.29 54.9 101.66 Atlanta 8 4,252 160.78 60.8
97.76 International 7 2,473 138.95 61.0 84.70 --- ----- All Regions
116 63,086 181.39 60.8 110.20 === ====== Quarter ended March 21,
2008 --------------------------------- Average Average Percent
Daily Occupancy Change in Rate Percentages RevPAR RevPAR ----------
----------- ------ ------ Pacific $206.08 72.7% $149.74 (22.5)%
Mid-Atlantic 236.96 73.7 174.58 (26.7) North Central 134.19 54.0
72.43 (16.7) Florida 248.72 81.2 201.85 (22.2) DC Metro 200.67 63.7
127.88 11.7 New England 155.62 59.7 92.92 (30.8) South Central
167.79 72.5 121.73 (16.1) Mountain 206.56 64.5 133.14 (23.6)
Atlanta 174.85 69.7 121.85 (19.8) International 162.16 69.4 112.49
(24.7) All Regions 198.44 69.3 137.47 (19.8) Comparable Hotels by
Property Type (a) As of March 27, 2009 Quarter ended March 27, 2009
-------------------- -------------------------------- Average No.
of No. of Average Occupancy Properties Rooms Daily Rate Percentages
RevPAR ---------- ------ ---------- ----------- ------- Urban 54
34,892 $187.43 60.9% $114.23 Suburban 34 12,904 148.80 56.2 83.68
Resort/Conference 13 8,082 252.83 65.2 164.95 Airport 15 7,208
129.69 63.1 81.83 --- ----- All Types 116 63,086 181.39 60.8 110.20
=== ====== Quarter ended March 21, 2008
--------------------------------- Average Average Percent Daily
Occupancy Change in Rate Percentages RevPAR RevPAR ----------
----------- ------ ------ Urban $201.20 70.1% $140.94 (19.0)
Suburban 163.36 62.7 102.43 (18.3) Resort/Conference 284.72 76.1
216.80 (23.9) Airport 143.97 70.1 100.93 (18.9) All Types 198.44
69.3 137.47 (19.8) (a) See the notes to financial information for a
discussion of reporting periods and comparable hotel results. HOST
HOTELS & RESORTS, INC. Comparable Hotel Operating Data Schedule
of Comparable Hotel Results (a) (unaudited, in millions, except
hotel statistics) Quarter ended ----------------------- March 27,
March 21, 2009 2008 -------- -------- Number of hotels 116 116
Number of rooms 63,086 63,086 Percent change in comparable hotel
RevPAR (19.8)% - Operating profit margin under GAAP (b) -% 12.6%
Comparable hotel adjusted operating profit margin (b) 21.8% 25.8%
Food and beverage profit margin under GAAP (b) 26.1% 27.4%
Comparable food and beverage adjusted profit margin (b) 26.8% 27.9%
Comparable hotel sales Room $516 $648 Food and beverage (c) 276 348
Other 71 78 -------- -------- Comparable hotel sales (d) 863 1,074
-------- -------- Comparable hotel expenses Room 138 161 Food and
beverage (e) 202 251 Other 32 39 Management fees, ground rent and
other costs 303 346 -------- -------- Comparable hotel expenses (f)
675 797 -------- -------- Comparable hotel adjusted operating
profit 188 277 Non-comparable hotel results, net (g) 3 (11) Office
buildings and select service properties, net (h) (1) - Depreciation
and amortization (178) (123) Corporate and other expenses (15) (17)
Gain on insurance settlement - 7 -------- -------- Operating profit
$(3) $133 ======== ======== (a) See the notes to the financial
information for discussion of non-GAAP measures, reporting periods
and comparable hotel results. (b) Operating profit margins are
calculated by dividing the applicable operating profit by the
related revenue amount. GAAP margins are calculated using amounts
presented in the consolidated statement of operations. Comparable
margins are calculated using amounts presented in the above table.
(c) The reconciliation of total food and beverage sales per the
consolidated statements of operations to the comparable food and
beverage sales is as follows: Quarter ended -----------------------
March 27, March 21, 2009 2008 -------- -------- Food and beverage
sales per the consolidated statements of operations $272 $332 Food
and beverage sales for the property for which we record rental
income 8 9 Adjustment for food and beverage sales for comparable
hotels to reflect Marriott's fiscal year for Marriott-managed
hotels (4) 7 -------- -------- Comparable food and beverage sales
$276 $348 ======== ======== (d) The reconciliation of total
revenues per the consolidated statements of operations to the
comparable hotel sales is as follows: Quarter ended
----------------------- March 27, March 21, 2009 2008 --------
-------- Revenues per the consolidated statements of operations
$882 $1,053 Business interruption revenues for comparable hotels -
7 Hotel sales for the property for which we record rental income,
net 12 13 Rental income for office buildings and select service
hotels (19) (19) Adjustment for hotel sales for comparable hotels
to reflect Marriott's fiscal year for Marriott-managed hotels (12)
20 -------- -------- Comparable hotel sales $863 $1,074 ========
======== (e) The reconciliation of total food and beverage expenses
per the consolidated statements of operations to the comparable
food and beverage expenses is as follows: Quarter ended
----------------------- March 27, March 21, 2009 2008 --------
-------- Food and beverage expenses per the consolidated statements
of operations $201 $241 Food and beverage expenses for the property
for which we record rental income 4 5 Adjustment for food and
beverage expenses for comparable hotels to reflect Marriott's
fiscal year for Marriott-managed hotels (3) 5 -------- --------
Comparable food and beverage expenses $202 $251 ======== ========
(f) The reconciliation of operating costs per the consolidated
statements of operations to the comparable hotel expenses is as
follows: Quarter ended ----------------------- March 27, March 21,
2009 2008 -------- -------- Operating costs and expenses per the
consolidated statements of operations $885 $920 Hotel expenses for
the property for which we record rental income 12 15 Rent expense
for office buildings and select service hotels (20) (19) Adjustment
for hotel expenses for comparable hotels to reflect Marriott's
fiscal year for Marriott-managed hotels (9) 14 Depreciation and
amortization (178) (123) Corporate and other expenses (15) (17)
Gain on insurance settlement - 7 -------- -------- Comparable hotel
expenses $675 $797 ======== ======== (g) Non-comparable hotel
results, net, includes the following items: (i) the results of
operations of our non-comparable hotels whose operations are
included in our consolidated statements of operations as continuing
operations and (ii) the difference between the number of days of
operations reflected in the comparable hotel results and the number
of days of operations reflected in the consolidated statements of
operations. (h) Represents rental income less rental expense for
select service properties and office buildings. HOST HOTELS &
RESORTS, INC. Other Financial and Operating Data (unaudited, in
millions, except per share amounts) March 27, December 31, 2009
2008 -------- ------------ Equity ------ Common shares outstanding
526.4 525.3 Common shares and minority held common OP Units
outstanding 540.6 540.4 Preferred OP Units outstanding .02 .02
Class E Preferred shares outstanding 4.0 4.0 Security pricing
---------------- Common (a) $4.25 $7.57 Class E Preferred (a)
$19.18 $17.20 3 1/4% Exchangeable Senior Debentures (b) $918.48
$861.51 2 5/8% Exchangeable Senior Debentures (b) $710.63 $663.70
Dividends declared per share for calendar year
---------------------------------------------- Common $- $.65 Class
E Preferred (c) $.555 $2.22 Debt ---- Series K senior notes, with a
rate of 7 1/8% due November 2013 $725 $725 Series M senior notes,
with a rate of 7% due August 2012 348 348 Series O senior notes,
with a rate of 6 3/8% due March 2015 650 650 Series Q senior notes,
with a rate of 6 3/4% due June 2016 800 800 Series S senior notes,
with a rate of 6 7/8% due November 2014 497 497 Exchangeable Senior
Debentures, with a rate of 3 1/4% due April 2024 (d) (e) 314 383
Exchangeable Senior Debentures, with a rate of 2 5/8% due April
2027 (e) 538 533 Senior notes, with rate of 10.0% due May 2012 7 7
----- ----- Total senior notes 3,879 3,943 Mortgage debt
(non-recourse) secured by $2.2 billion of real estate assets, with
an average interest rate of 6.0% and 6.2% at March 27, 2009 and
December 31, 2008, respectively, maturing through December 2023
1,517 1,436 Credit facility, including the $210 million term loan
(e)(f) 410 410 Other 87 87 ----- ----- Total debt (g)(h) $5,893
$5,876 ====== ====== Percentage of fixed rate debt 86% 88% Weighted
average interest rate 5.7% 5.8% Weighted average debt maturity 4.5
years 4.6 years Quarter ended ------------- March 27, March 21,
2009 2008 -------- ------------ Hotel Operating Statistics for All
Properties (i) Average daily rate $181.12 $198.00 Average occupancy
60.8% 69.3% RevPAR $110.08 $137.25 (a) Share prices are the closing
price as reported by the New York Stock Exchange. (b) Amount
reflects market price of a single $1,000 debenture as quoted by
Bloomberg L.P. (c) On March 16, 2009, the Company declared a first
quarter preferred dividend of $.5546875 per share for its Class E
cumulative redeemable preferred stock. (d) During the first
quarter, the Company repurchased $75 million face value of its 2004
Debentures for approximately $69 million. The repurchased
debentures had a carrying value of $72 million at the time of
repurchase, therefore, the Company recorded a gain on repurchase of
approximately $3 million. (e) During the first quarter of 2009, we
adopted FSP 14-1, which requires issuers of cash-settled
exchangeable debentures to separately account for the liability and
equity components in a manner that will reflect the entity's
nonconvertible debt borrowing rate on the instrument's issuance
date. Therefore, we are required to record the debt components of
the debentures at fair value as of the date of issuance with the
adjustment to Additional Paid-in Capital and amortize the resulting
discount as an increase to interest expense over the expected life
of the debt. FSP 14-1 has been applied retrospectively to all
periods presented. The principal balance for our 2004 and 2007
Debentures was reduced by $66 million and $76 million as of March
27, 2009 and December 31, 2008, respectively, which reflects the
unamortized discount balance related to the implementation of FSP
14-1. The discounts will be amortized through the first date at
which the holders can require Host to repurchase the debentures for
cash (March 2010 for the 2004 Debentures and March 2012 for the
2007 Debentures). As a result of the adoption of FSP 14-1, interest
expense increased $7 million for both the first quarters of 2009
and 2008, respectively. (f) Currently, the Company has $400 million
of available capacity under the revolver portion of the Credit
Facility. (g) In accordance with GAAP, total debt includes the debt
of entities that we consolidate, but do not own 100% of the
interests, and excludes the debt of entities that we do not
consolidate, but have a non-controlling ownership interest and
record our investment therein under the equity method of
accounting. As of March 27, 2009, our non-controlling partners'
share of consolidated debt is $68 million and our share of debt in
unconsolidated investments is $340 million. (h) Total debt as of
March 27, 2009 and December 31, 2008 includes net discounts and
premiums of $75 million and $86 million, respectively. (i) The
operating statistics reflect all consolidated properties as of
March 27, 2009 and March 21, 2008, respectively. The operating
statistics include the results of operations for one property sold
as of March 27, 2009 and two properties sold as of March 21, 2008
prior to their disposition. HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income Available to Common Stockholders to
Funds From Operations per Diluted Share (unaudited, in millions,
except per share amounts) Quarter ended Quarter ended March 27,
2009 March 21, 2008 ---------------------- ----------------------
Per Per Share Share Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------ Net income available to
common stockholders $(61) 526.1 $(.12) $52 522.6 $.10 Adjustments:
Gains on dispositions, net of taxes (18) - (.04) - - - Amortization
of deferred gains and other property transactions, net of taxes (1)
- - (1) - - Depreciation and amortization (a) 139 - .26 124 - .24
Partnership adjustments - - - 5 - .01 FFO of non-controlling
partners of Host LP (b) (2) - - (7) - (.01) Adjustments for
dilutive securities: Assuming distribution of common shares granted
under the comprehensive stock plan less shares assumed purchased at
average market price - .2 - - .2 - Assuming deduction of gain
recognized for the repurchase of 2004 Exchangeable Senior
Debentures (c) (2) 3.9 - - - - Assuming conversion of 2004
Exchangeable Senior Debentures - - - 7 30.5 (.01) ------ ------
------ ------ ------ ------ FFO per diluted share (d)(e) $55 530.2
$.10 $180 553.3 $.33 ====== ====== ====== ====== ====== ====== (a)
In accordance with the guidance on FFO per diluted share provided
by the National Association of Real Estate Investment Trusts, we do
not adjust net income for the non-cash impairment charges when
determining our FFO per diluted share. See note (b) to "Schedule of
Significant Items Affecting Earnings per Diluted Share and Funds
From Operations per Diluted Share" for further discussion. (b)
Represents FFO attributable to the non-controlling interests in
Host LP. (c) During the first quarter of 2009, the Company
repurchased $75 million face value of its 2004 Debentures with a
carrying value of $72 million for $69 million. The adjustments to
dilutive FFO related to the 2004 Debentures includes $3 million
gain recognized, net of interest expense on the repurchased
debentures. (d) FFO per diluted share in accordance with NAREIT is
adjusted for the effects of dilutive securities. Dilutive
securities may include shares granted under comprehensive stock
plans, preferred OP Units held by non-controlling partners,
exchangeable debt securities and other non-controlling interests
that have the option to convert their limited partnership interest
to common OP Units. No effect is shown for securities if they are
anti-dilutive. (e) FFO per diluted share was significantly affected
by certain transactions. For further detail see "Schedule of
Significant Items Affecting Earnings per Diluted Share and Funds
From Operations per Diluted Share." HOST HOTELS & RESORTS, INC.
Schedule of Significant Items Affecting Earnings per Share and
Funds From Operations per Diluted Share (unaudited, in millions,
except per share amounts) Quarter ended Quarter ended March 27,
2009 March 21, 2008 ---------------- --------------- Net Income Net
Income (Loss) FFO (Loss) FFO ---------- ---- ---------- ---- Gain
on hotel dispositions, net of taxes $18 $- $- $- Non-cash interest
expense on Exchangeable Senior Debentures due to the adoption of
FSP 14-1 (a) (7) (10) (7) (4) Non-cash impairment charges (b) (40)
(40) - - Gain (loss) attributable to non-controlling interests (c)
1 1 - - --- --- --- --- Total $(28) $(49) $(7) $(4) ===== =====
==== ==== Diluted shares 530.0 550.8 522.8 553.3 Per diluted share
$(.05) $(.09) $(.01) $- ===== ===== ===== ===== (a) Represents
non-cash interest recognized related to our Exchangeable Senior
Debentures in accordance with the implementation of FSP 14-1. For
the calculation of earnings per share, the interest expense for
both the first quarter of 2009 and 2008 include $7 million of
non-cash interest expense related to the 2004 and 2007 Debentures
because both debentures were anti-dilutive for both 2008 and 2009
earnings per share purposes. The $10 million adjustment for the
first quarter of 2009 reflects $7 million related to the non-cash
interest expense for our 2007 and 2004 Debentures, as well as $3
million of contractual interest expense for the 2004 Debentures.
The $3 million of contractual interest expense, along with 20.6
million shares, is being included in the above calculation as the
2004 Debentures would be dilutive in determining diluted FFO per
share only after taking into account the significant items
described above. The $4 million adjustment for the first quarter of
2008 reflects the non-cash interest expense related to our 2007
Debentures. The interest effect of the 2004 Debentures is not
included in the first quarter of 2008 reconciliation as the
interest expense had been added-back in the initial calculation of
diluted FFO per share. (b) During the first quarter of 2009, we
identified several non-core properties that may be sold prior to
the end of their previously expected useful lives. Therefore, we
tested these properties for impairment based on management's
estimate of expected future undiscounted cash flows over our
expected holding period taking into account the probability of
consummating the sale. For the two assets where the undiscounted,
probability-weighted cash flows were below the carrying amount, we
recorded non-cash impairment charges totaling $40 million based on
the difference between the discounted cash flows and the carrying
amount. These impairments are included in depreciation expense on
the accompanying statements of operations. (c) Represents the
portion of the significant items attributable to non-controlling
partners in Host LP. HOST HOTELS & RESORTS, INC. Reconciliation
of Net Income to EBITDA and Adjusted EBITDA (unaudited, in
millions) Quarter ended --------------------------- March 27, March
21, 2009 2008 --------- --------- Net income $(60) $63 Interest
expense 87 83 Depreciation and amortization 138 123 Income taxes
(14) (7) Discontinued operations (a) 1 2 --------- --------- EBITDA
152 264 Gains on dispositions (19) - Non-cash impairment charges on
potential asset dispositions (b) 40 - Amortization of deferred
gains (1) (1) Equity investment adjustments: Equity in earnings of
affiliates 3 - Pro rata EBITDA of equity investments 4 6
Consolidated partnership adjustments: Pro rata EBITDA attributable
to non-controlling partners in other consolidated partnerships (5)
(7) --------- --------- Adjusted EBITDA $174 $262 =========
========= (a) Reflects the interest expense, depreciation and
amortization and income taxes included in discontinued operations.
(b) During the first quarter of 2009, we identified several
non-core properties that may be sold prior to the end of their
previously expected useful lives. Therefore, we tested these
properties for impairment based on management's estimate of
expected future undiscounted cash flows over our expected holding
period taking into account the probability of consummating a sale.
For the two assets where the undiscounted, probability-weighted
cash flows were below the carrying amount, we recorded non-cash
impairment charges totaling $40 million based on the difference
between the discounted cash flows and the carrying amount. These
impairments are included in depreciation expense on the
accompanying statements of operations. HOST HOTELS & RESORTS,
INC. Reconciliation of Net Income Available to Common Stockholders
to Funds From Operations per Diluted Share for Full Year 2009
Forecasts (a) (unaudited, in millions, except per share amounts)
Low-end of Range ----------------------- Full Year 2009 Forecast
----------------------- Per Share Income Shares Amount ------
------ ------ Forecast net income available to common stockholders
$(218) 530.9 $(.41) Adjustments: Depreciation and amortization 612
- 1.15 Gain on dispositions, net of taxes (22) - (.04) Partnership
adjustments 4 - .01 FFO of non-controlling partners of Host LP (b)
(10) - (.02) Adjustment for dilutive securities: Assuming
distribution of common shares granted under the comprehensive stock
plan less shares assumed purchased at average market price - .7 -
Assuming the reduction of the gain recognized upon the repurchase
of the 2004 Exchangeable Senior Debentures (2) .9 (.01) ------
------ ------ FFO per diluted share $364 532.5 $.68 ====== ======
====== High-end of Range ----------------------- Full Year 2009
Forecast ----------------------- Per Share Income Shares Amount
------ ------ ------ Forecast net income available to common
stockholders $(179) 530.9 $(.34) Adjustments: Depreciation and
amortization 612 - 1.15 Gain on dispositions, net of taxes (22) -
(.04) Partnership adjustments 5 - .01 FFO of non-controlling
partners of Host LP (b) (11) - (.02) Adjustment for dilutive
securities: Assuming distribution of common shares granted under
the comprehensive stock plan less shares assumed purchased at
average market price - .7 - Assuming the reduction of the gain
recognized upon the repurchase of the 2004 Exchangeable Senior
Debentures (2) .9 - ------ ------ ------ FFO per diluted share $403
532.5 $.76 ====== ====== ====== (a) The full year 2009 forecasts
were based on the following assumptions: -- Comparable hotel RevPAR
will decrease 18% to 20% for the full year for the high and low
ends of the forecasted range, respectively. -- Comparable hotel
adjusted operating profit margins will range from a decrease of 540
basis points to 600 basis points for the full year for the high and
low ends of the forecasted range, respectively. -- The
implementation of FSP 14-1 will increase the non-cash interest
expense applied to the 2004 and 2007 Debentures by approximately
$30 million. Additionally, we recorded non-cash impairment charges
of $40 million in the first quarter related to potential asset
sales. These non-cash charges will decrease earnings and FFO per
diluted share by approximately $.12. -- We do not anticipate that
any acquisitions will be made during 2009. -- We expect to have
additional hotel dispositions of approximately $100 million during
2009. -- We expect to spend approximately $340 million to $360
million on capital expenditures in 2009. -- Fully diluted weighted
average shares for FFO per diluted share and earnings per diluted
share will be approximately 532.5 million. The amounts shown in
these forecasts are based on these and other assumptions, as well
as management's estimate of operations for 2009. These forecasts
are forward-looking and are not guarantees of future performance
and involve known and unknown risks, uncertainties and other
factors which may cause actual transactions, results and
performance to differ materially from those expressed or implied by
these forecasts. Although we believe the expectations reflected in
the forecasts are based upon reasonable assumptions, we can give no
assurance that the expectations will be attained or that the
results will be materially different. Risks that may affect these
assumptions and forecasts include the following: -- the level of
RevPAR and margin growth may change significantly and as noted
previously, the current recession and volatility in the credit
markets have created limited visibility for advance bookings for
both transient and group business and accordingly, our ability to
predict operating results for 2009; -- the amount and timing of
acquisitions and dispositions of hotel properties is an estimate
that can substantially affect financial results, including such
items as net income, depreciation and gains on dispositions; -- the
level of capital expenditures may change significantly, which will
directly affect the level of depreciation expense and net income;
-- the amount and timing of debt payments may change significantly
based on market conditions, which will directly affect the level of
interest expense and net income; -- the number of shares of the
Company's common stock repurchased may change based on market
conditions; and -- other risks and uncertainties associated with
our business described herein and in the Company's filings with the
SEC. (b) Represents FFO attributable to the non-controlling
interests in Host LP. HOST HOTELS & RESORTS, INC. Schedule of
Comparable Hotel Adjusted Operating Profit Margin for Full Year
2009 Forecasts (a) (unaudited, in millions, except hotel
statistics) Full Year 2009 ---------------------- Low-end High-end
of range of range -------- -------- Operating profit margin under
GAAP (b) 3.0% 4.1% Comparable hotel adjusted operating profit
margin (c) 20.2% 20.8% Comparable hotel sales Room $2,580 $2,644
Other 1,610 1,662 -------- -------- Comparable hotel sales (d)
4,190 4,306 -------- -------- Comparable hotel expenses Rooms and
other departmental costs 1,823 1,815 Management fees, ground rent
and other costs 1,522 1,597 -------- -------- Comparable hotel
expenses (e) 3,345 3,412 -------- -------- Comparable hotel
adjusted operating profit 845 894 Non-comparable hotel results, net
1 2 Office buildings and select service properties, net - -
Depreciation and amortization (653) (653) Corporate and other
expenses (65) (65) -------- -------- Operating profit $128 $178
======== ======== (a) Forecasted comparable hotel results include
assumptions on the number of hotels that will be included in our
comparable hotel set in 2009. We have assumed that 116 hotels will
be classified as comparable as of December 31, 2009. No assurances
can be made as to the hotels that will be in the comparable hotel
set for 2009. Also, see the notes following the table reconciling
net income available to common shareholders to Funds From
Operations per Diluted Share for assumptions relating to the full
year 2009. (b) Operating profit margin under GAAP is calculated as
the operating profit divided by the forecast total revenues per the
consolidated statements of operations. See (d) below for forecasted
revenues. (c) Comparable hotel adjusted operating profit margin is
calculated as the comparable hotel adjusted operating profit
divided by the comparable hotel sales per the table above. The
forecasted decline in the comparable hotel adjusted operating
profit margin includes two items which accounts for 50 basis points
of the above decline. The effect on the adjusted operating profit
margins for the first quarter of 2009 for these two items is
approximately 60 basis points. (1) The 2008 comparable hotel
operating profit includes business interruption proceeds of
approximately $5 million, net of expenses, received in 2008 for the
New Orleans Marriott which had previously been non-comparable. We
do not expect to receive any business interruption proceeds in
2009. (2) The Company will incur additional expenses in 2009 due to
the treatment of the ground lease payments related to the New York
Marriott Marquis. Since the renegotiation of the ground lease on
the New York Marriott Marquis in 1998, the ground lease payments
have reduced the deferred ground rent liability, and more recently,
have been applied against the deferred purchase price of the land.
As a result, there was no operating profit reduction for these
payments. In 2009, a small portion of the payments will fully fund
the deferred purchase price and the remainder of approximately $18
million will be deducted from operating profit. (d) The
reconciliation of forecast total revenues to the forecast
comparable hotel sales is as follows (in millions): Full Year 2009
---------------------- Low-end High-end of range of range --------
-------- Revenues $4,228 $4,344 Non-comparable hotel sales 5 5
Hotel sales for the property for which we record rental income, net
41 41 Rental income for office buildings and select service hotels
(84) (84) -------- -------- Comparable hotel sales $4,190 $4,306
======== ======== (e) The reconciliation of forecast operating
costs and expenses to the comparable hotel expenses is as follows
(in millions): Full Year 2009 ---------------------- Low-end
High-end of range of range -------- -------- Operating costs and
expenses $4,100 $4,166 Non-comparable hotel expenses 6 7 Hotel
expenses for the property for which we record rental income 41 41
Rent expense for office buildings and select service hotels (84)
(84) Depreciation and amortization (653) (653) Corporate and other
expenses (65) (65) -------- -------- Comparable hotel expenses
$3,345 $3,412 ======== ======== HOST HOTELS & RESORTS, INC.
Reconciliation of Net Income to EBITDA and Adjusted EBITDA for Full
Year 2009 Forecasts (a) (unaudited, in millions) Full Year 2009
---------------------- Low-end High-end of range of range --------
-------- Net income $(216) $(176) Interest expense 394 394
Depreciation and amortization 613 613 Income taxes (31) (21)
-------- -------- EBITDA 760 810 Gains on dispositions (22) (22)
Impairment Charges 40 40 Equity investment adjustments: Equity in
earnings of affiliates 7 7 Pro rata Adjusted EBITDA of equity
investments 28 28 Consolidated partnership adjustments: Pro rata
Adjusted EBITDA attributable to non-controlling partners in other
consolidated partnerships (13) (13) -------- -------- Adjusted
EBITDA $800 $850 ======== ======== (a) See the notes following the
table reconciling net income available to common shareholders to
Funds From Operations per Diluted Share for assumptions relating to
the full year 2009. HOST HOTELS & RESORTS, INC. Notes to
Financial Information REPORTING PERIODS FOR STATEMENT OF OPERATIONS
The results we report in our consolidated statements of operations
are based on results of our hotels reported to us by our hotel
managers. Our hotel managers use different reporting periods.
Marriott International, Inc., or Marriott, the manager of the
majority of our properties, uses a fiscal year ending on the Friday
closest to December 31 and reports twelve weeks of operations for
the first three quarters and sixteen or seventeen weeks for the
fourth quarter of the year for its Marriott-managed hotels. In
contrast, other managers of our hotels, such as Starwood and Hyatt,
report results on a monthly basis. Additionally, Host, as a REIT,
is required by tax laws to report results on a calendar year. As a
result, we elected to adopt the reporting periods used by Marriott
except that our fiscal year always ends on December 31 to comply
with REIT rules. Our first three quarters of operations end on the
same day as Marriott but our fourth quarter ends on December 31 and
our full year results, as reported in our consolidated statement of
operations, always includes the same number of days as the calendar
year. Two consequences of the reporting cycle we have adopted are:
(1) quarterly start dates will usually differ between years, except
for the first quarter which always commences on January 1, and (2)
our first and fourth quarters of operations and year-to-date
operations may not include the same number of days as reflected in
prior years. For example, the first quarter of 2009 ended on March
27, 2009, and the first quarter of 2008 ended on March 21, 2008. As
a result, the first quarter of 2009 included 86 days of operations,
while the first quarter 2008 included 81 days of operations,
including February 29, 2008. While the reporting calendar we
adopted is more closely aligned with the reporting calendar used by
the manager of a majority of our properties, one final consequence
of our calendar is we are unable to report the month of operations
that ends after our fiscal quarter-end until the following quarter
because our hotel managers using a monthly reporting period do not
make mid-month results available to us. Hence, the month of
operation that ends after our fiscal quarter-end is included in our
quarterly results of operations in the following quarter for those
hotel managers (covering approximately 41% of our hotels). As a
result, our quarterly results of operations include results from
hotel managers reporting results on a monthly basis as follows:
first quarter (January, February), second quarter (March to May),
third quarter (June to August) and fourth quarter (September to
December). While this does not affect full-year results, it does
affect the reporting of quarterly results. REPORTING PERIODS FOR
HOTEL OPERATING STATISTICS AND COMPARABLE HOTEL RESULTS In contrast
to the reporting periods for our consolidated statement of
operations, our hotel operating statistics (i.e., RevPAR, average
daily rate and average occupancy) and our comparable hotel results
are always reported based on the reporting cycle used by Marriott
for our Marriott-managed hotels. This facilitates year-to-year
comparisons, as each reporting period will be comprised of the same
number of days of operations as in the prior year (except in the
case of fourth quarters comprised of seventeen weeks (such as
fiscal year 2008) versus sixteen weeks). This means, however, that
the reporting periods we use for hotel operating statistics and our
comparable hotels results may differ slightly from the reporting
periods used for our statements of operations for the first and
fourth quarters and the full year. Results from hotel managers
reporting on a monthly basis are included in our operating
statistics and comparable hotels results consistent with their
reporting in our consolidated statement of operations herein: --
Hotel results for the first quarter of 2009 reflect 12 weeks of
operations for the period from January 3, 2009 to March 27, 2009
for our Marriott-managed hotels and results from January 1, 2009 to
February 28, 2009 for operations of all other hotels which report
results on a monthly basis. -- Hotel results for the first quarter
of 2008 reflect 12 weeks of operations for the period from December
29, 2007 to March 21, 2008 for our Marriott-managed hotels and
results from January 1, 2008 to February 29, 2008 for operations of
all other hotels which report results on a monthly basis.
COMPARABLE HOTEL OPERATING STATISTICS We present certain operating
statistics (i.e., RevPAR, average daily rate and average occupancy)
and operating results (revenues, expenses, adjusted operating
profit and adjusted operating profit margin) for the periods
included in this report on a comparable hotel basis. We define our
comparable hotels as properties (i) that are owned or leased by us
and the operations of which are included in our consolidated
results, whether as continuing operations or discontinued
operations, for the entirety of the reporting periods being
compared, and (ii) that have not sustained substantial property
damage or business interruption or undergone large-scale capital
projects during the reporting periods being compared. All of our
hotels that we owned as of March 27, 2009, have been classified as
comparable hotels. The operating results of one hotel we disposed
of in 2009 and the two hotels we disposed of in 2008 are also not
included in comparable hotel results for the periods presented
herein. Moreover, because these statistics and operating results
are for our hotel properties, they exclude results for our
non-hotel properties and other real estate investments. NON-GAAP
FINANCIAL MEASURES Included in this press release are certain
"non-GAAP financial measures," which are measures of our historical
or future financial performance that are not calculated and
presented in accordance with GAAP, within the meaning of applicable
SEC rules. They are as follows: (i) FFO per diluted share, (ii)
EBITDA, (iii) Adjusted EBITDA and (iv) Comparable Hotel Operating
Results. The following discussion defines these terms and presents
why we believe they are useful supplemental measures of our
performance. FFO per Diluted Share We present FFO per diluted share
as a non-GAAP measure of our performance in addition to our
earnings per share (calculated in accordance with GAAP). We
calculate FFO per diluted share for a given operating period as our
FFO (defined as set forth below) for such period divided by the
number of fully diluted shares outstanding during such period. The
National Association of Real Estate Investment Trusts (NAREIT)
defines FFO as net income (calculated in accordance with GAAP)
excluding gains (losses) from sales of real estate, the cumulative
effect of changes in accounting principles, real estate-related
depreciation and amortization and adjustments for unconsolidated
partnerships and joint ventures. We present FFO on a per share
basis after making adjustments for the effects of dilutive
securities and the payment of preferred stock dividends, in
accordance with NAREIT guidelines. We believe that FFO per diluted
share is a useful supplemental measure of our operating performance
and that the presentation of FFO per diluted share, when combined
with the primary GAAP presentation of earnings per share, provides
beneficial information to investors. By excluding the effect of
real estate depreciation, amortization and gains and losses from
sales of real estate, all of which are based on historical cost
accounting and which may be of lesser significance in evaluating
current performance, we believe such measures can facilitate
comparisons of operating performance between periods and with other
REITs, even though FFO per diluted share does not represent an
amount that accrues directly to holders of our common stock.
Historical cost accounting for real estate assets implicitly
assumes that the value of real estate assets diminishes predictably
over time. As noted by NAREIT in its April 2002 "White Paper on
Funds From Operations," since real estate values have historically
risen or fallen with market conditions, many industry investors
have considered presentation of operating results for real estate
companies that use historical cost accounting to be insufficient by
themselves. For these reasons, NAREIT adopted the definition of FFO
in order to promote an industry-wide measure of REIT operating
performance. EBITDA Earnings before Interest Expense, Income Taxes,
Depreciation and Amortization (EBITDA) is a commonly used measure
of performance in many industries. Management believes EBITDA
provides useful information to investors regarding our results of
operations because it helps us and our investors evaluate the
ongoing operating performance of our properties and facilitates
comparisons between us and other lodging REITs, hotel owners who
are not REITs and other capital-intensive companies. Management
uses EBITDA to evaluate property-level results and as one measure
in determining the value of acquisitions and dispositions and, like
FFO per diluted share, it is widely used by management in the
annual budget process. Adjusted EBITDA Historically, management has
adjusted EBITDA when evaluating our performance because we believe
that the exclusion of certain additional recurring and
non-recurring items described below provides useful supplemental
information to investors regarding our ongoing operating
performance and that the presentation of Adjusted EBITDA, when
combined with the primary GAAP presentation of net income, is
beneficial to an investor's complete understanding of our operating
performance and is a relevant measure in calculating certain credit
ratios. We adjust EBITDA for the following items, which may occur
in any period, and refer to this measure as Adjusted EBITDA: --
Real Estate Transactions - We exclude the effect of gains and
losses, including the amortization of deferred gains, recorded on
the disposition of assets and property insurance gains in our
consolidated statement of operations because we believe that
including them in Adjusted EBITDA is not consistent with reflecting
the ongoing performance of our remaining assets. In addition,
material gains or losses from the depreciated value of the disposed
assets could be less important to investors given that the
depreciated asset often does not reflect the market value of real
estate assets (as noted above for FFO). -- Equity Investment
Adjustments - We exclude the equity in earnings (losses) of
unconsolidated investments in partnerships and joint ventures as
presented in our consolidated statement of operations because it
includes our pro-rata portion of depreciation, amortization and
interest expense. We include our pro rata share of the Adjusted
EBITDA of our equity investments as we believe this more accurately
reflects the performance of our investment. The pro rata Adjusted
EBITDA of equity investments is defined as the EBITDA of our equity
investments adjusted for any gains or losses on property
transactions multiplied by our percentage ownership in the
partnership or joint venture. -- Consolidated Partnership
Adjustments -We deduct the non-controlling partners' pro rata share
of the Adjusted EBITDA of our consolidated partnerships as this
reflects the non-controlling owners' interest in the EBITDA of our
consolidated partnerships. The pro rata Adjusted EBITDA of
non-controlling partners is defined as the EBITDA of our
consolidated partnerships adjusted for any gains or losses on
property transactions multiplied by the non-controlling partners'
positions in the partnership or joint venture. -- Cumulative Effect
of a Change in Accounting Principle - Infrequently, the Financial
Accounting Standards Board (FASB) promulgates new accounting
standards that require the consolidated statement of operations to
reflect the cumulative effect of a change in accounting principle.
We exclude these one-time adjustments because they do not reflect
our actual performance for that period. -- Impairment Losses - We
exclude the effect of impairment losses recorded because we believe
that including them in Adjusted EBITDA is not consistent with
reflecting the ongoing performance of our remaining assets. In
addition, we believe that impairment charges are similar to gains
(losses) on dispositions and depreciation expense, both of which
are also excluded from EBITDA. Limitations on the Use of FFO per
Diluted Share, EBITDA and Adjusted EBITDA We calculate FFO per
diluted share in accordance with standards established by NAREIT,
which may not be comparable to measures calculated by other
companies who do not use the NAREIT definition of FFO or calculate
FFO per diluted share in accordance with NAREIT guidance. In
addition, although FFO per diluted share is a useful measure when
comparing our results to other REITs, it may not be helpful to
investors when comparing us to non-REITs. EBITDA and Adjusted
EBITDA, as presented, may also not be comparable to measures
calculated by other companies. This information should not be
considered as an alternative to net income, operating profit, cash
from operations or any other operating performance measure
calculated in accordance with GAAP. Cash expenditures for various
long-term assets (such as renewal and replacement capital
expenditures), interest expense (for EBITDA and Adjusted EBITDA
purposes only) and other items have been and will be incurred and
are not reflected in the EBITDA, Adjusted EBITDA and FFO per
diluted share presentations. Management compensates for these
limitations by separately considering the impact of these excluded
items to the extent they are material to operating decisions or
assessments of our operating performance. Our consolidated
statement of operations and cash flows include interest expense,
capital expenditures, and other excluded items, all of which should
be considered when evaluating our performance, as well as the
usefulness of our non-GAAP financial measures. Additionally, FFO
per diluted share, EBITDA and Adjusted EBITDA should not be
considered as a measure of our liquidity or indicative of funds
available to fund our cash needs, including our ability to make
cash distributions. In addition, FFO per diluted share does not
measure, and should not be used as a measure of, amounts that
accrue directly to stockholders' benefit. Comparable Hotel
Operating Results We present certain operating results for our
hotels, such as hotel revenues, expenses, adjusted operating profit
(and the related margin) and food and beverage adjusted profit (and
the related margin), on a comparable hotel, or "same store," basis
as supplemental information for investors. Our comparable hotel
results present operating results for hotels owned during the
entirety of the periods being compared without giving effect to any
acquisitions or dispositions, significant property damage or large
scale capital improvements incurred during these periods. We
present these comparable hotel operating results by eliminating
corporate-level costs and expenses related to our capital
structure, as well as depreciation and amortization. We eliminate
corporate-level costs and expenses to arrive at property-level
results because we believe property-level results provide investors
with supplemental information into the ongoing operating
performance of our hotels. We eliminate depreciation and
amortization because, even though depreciation and amortization are
property-level expenses, these non-cash expenses, which are based
on historical cost accounting for real estate assets, implicitly
assume that the value of real estate assets diminishes predictably
over time. As noted earlier, because real estate values have
historically risen or fallen with market conditions, many industry
investors have considered presentation of operating results for
real estate companies that use historical cost accounting to be
insufficient by themselves. As a result of the elimination of
corporate-level costs and expenses and depreciation and
amortization, the comparable hotel operating results we present do
not represent our total revenues, expenses, operating profit or
operating profit margin and should not be used to evaluate our
performance as a whole. Management compensates for these
limitations by separately considering the impact of these excluded
items to the extent they are material to operating decisions or
assessments of our operating performance. Our consolidated
statements of operations include such amounts, all of which should
be considered by investors when evaluating our performance. We
present these hotel operating results on a comparable hotel basis
because we believe that doing so provides investors and management
with useful information for evaluating the period-to-period
performance of our hotels and facilitates comparisons with other
hotel REITs and hotel owners. In particular, these measures assist
management and investors in distinguishing whether increases or
decreases in revenues and/or expenses are due to growth or decline
of operations at comparable hotels (which represent the vast
majority of our portfolio) or from other factors, such as the
effect of acquisitions or dispositions. While management believes
that presentation of comparable hotel results is a "same store"
supplemental measure that provides useful information in evaluating
our ongoing performance, this measure is not used to allocate
resources or to assess the operating performance of each of these
hotels, as these decisions are based on data for individual hotels
and are not based on comparable hotel results. For these reasons,
we believe that comparable hotel operating results, when combined
with the presentation of GAAP operating profit, revenues and
expenses, provide useful information to investors and management.
http://www.newscom.com/cgi-bin/prnh/20060417/HOSTLOGO
http://photoarchive.ap.org/ DATASOURCE: Host Hotels & Resorts,
Inc. CONTACT: Gregory J. Larson, Treasurer, Senior Vice President
Investor Relations of Host Hotels & Resorts, Inc.,
+1-240-744-5120 Web Site: http://www.hosthotels.com/
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